4/1/2025
Investment Bankers Watch on in NZME Fight as Battle Escalates
The Australian (04/01/25) Carter, Bridget
Investment bankers could be on standby at the end of the week when shareholders in the Australia and New Zealand-listed NZME (NZM) will be released from a trading lock-up connected with a Takeovers Panel investigation. The panel has been looking into whether activist investors are working together to overthrow the board of the $200m loss-making Australian and New Zealand-listed media company. If that is found to be the case, it would require a buyout proposal, because collectively they own more than 19.9% of the stock. An investor cannot go beyond this point without making a bid unless they’re increasing their interest through creep provisions. Until the New Zealand Takeovers Panel makes its ruling, shareholders are banned from trading their stock, but that is set to wind up by the end of the week. Some market observers say private equity tycoon James Grenon could increase his holding in the company from about 10% to about 19% to ensure he gains boardroom control at the group’s annual general meeting. Based on where shares are trading, and factoring in a 30% premium, he could pick up a further stake of 9% for about $24 million. Grenon has proposed replacing chairman Barbara Chapman with himself and introducing other directors: Caniwi Capital’s Des Gittings, lawyer and commentator Philip Crump and former Trademe and Adairs director Simon West are his chosen candidates. One of the other major shareholders who supports the proposal said he believed Grenon would not need to buy more shares, as he already had enough support for the majority of shareholders to vote through his proposals. U.S. hedge fund Osmium Partners, Australia’s Spheria Asset Management and Caniwi Capital are all supporting boardroom change of some sort. Since Grenon’s first proposition, he has offered some options for compromise: NZME chief executive Michael Boggs could remain at the company and be appointed to the board or other directors could remain. NZME owns the country’s largest radio network, including the leading talkback station Newstalk ZB, as well as the online real estate company One Roof, which may be subject to a demerger following a Jarden-run strategic review. It also owns publications such as the country’s largest newspaper, the New Zealand Herald. NZME has faced investor activism after posting a $NZ16m loss last year in a weak advertising market. Its publishing arm has been singled out as a particularly poor performer: digital subscriptions increased but print subscriptions went backwards, leading to flat reader revenue, falling advertising dollars and lower earnings. Publishing took a $NZ24m impairment charge, and critics blamed the result on the poor quality of editorial coverage, which some believe lacks balance and wide audience appeal and is too focused on click-bait. NZME would not specifically comment on a report by the newspaper’s former editor, Tim Murphy that said almost all of the New Zealand Herald’s digital home page was now robot-selected, with artificial intelligence being used to decide which stories get placed where, and for how long. But NZME responded saying: “NZME has invested in automation technology...(but)...there is always human oversight across all content and sections of the homepage are always curated by editors." Eyebrows were raised last month when the company announced that it would “set a new tone and build positive social momentum for New Zealanders." This week, the company has significantly ramped up its own attack on Grenon and his proposal backers, with a 23-page announcement, including a 15-page slide pack on why his proposals would fail, and why NZME was outperforming the industry. On the back of the latest developments NZME directors have pushed back its annual general meeting from April 29 to June 3. The company legally must conduct the AGM before June 30. It also flagged concerns about Grenon’s proposals, including the lack of alternative plan, risks he would gain editorial control and poor governance. Grenon earlier said his plan was to improve cost control and lift editorial standards at the New Zealand Herald. He said that he would establish an editorial board and that he would be responsible for raising standards. One of the areas of particular criticism is that the company has sacked proficient journalists to cut costs while its own corporate costs increased. The total pay packet of Boggs averages $NZ2m annually. Last year, his base salary and super contributions were $NZ899,045 ($815,000). This compares with the Australian-listed broadcaster Southern Cross Media (SXL), which in May last year had a higher market value than NZME at $231m and paid chief executive John Kelly a base salary of $786,392. Nine, a $2.5bn diverse media group, this year appointed Matt Stanton as its chief executive with $1.6m of base pay. Jeff Howard, chief executive at Seven West Media which owns the West Australian newspaper and one of the country’s largest television broadcasters, was paid $1.25m. Since the shareholder activism, NZME flagged plans to find its own new directors. It said it acknowledged the importance of quality journalism and was focused on initiatives such as quality control, which included ranking every article and journalist on performance metrics like growing subscriptions and audience engagement. But shareholder Troy Bowker, who runs Caniwi Capital and has about 3.5% of the register, said it was “too little too late." He earlier said the board was neglecting shareholders and that it was not true that investors wanted to narrow NZME’s audience appeal.
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